(Reuters) -Texas Instruments ( TXN ) jumped around 7% in premarket trade on Wednesday, sparking a rally in chip stocks as its strong second-quarter revenue forecast fanned optimism that chip demand was picking up after a years-long slump.

The company is seen as a bellwether for semiconductor demand, as its products are used across industries ranging from automotive to industrial and consumer electronics including smartphones and personal computers.

Shares of Nvidia ( NVDA ), Advanced Micro Devices ( AMD ), Arm Holdings and Micron Technology ( MU ) rose between 2% and 5%.

Texas Instruments ( TXN ) said on Tuesday it expects revenue with a midpoint of $3.8 billion for the second quarter, compared with LSEG estimates of $3.77 billion.

Its earnings are closely watched as it is the first among major U.S. semiconductor firms to report quarterly results.

"Looking ahead, we anticipate Texas Instruments ( TXN ) to drive a continued recovery profile into the 2H (second half) of the year and into 2025" said J.P. Morgan analysts in a note.

If gains hold, the stock will be set to add around $10 billion to its market valuation. It is valued at $150 billion based on its Tuesday closing price.

Improving demand for consumer electronics also indicates that clients' analog chip inventory corrections might be ending.

Texas Instruments' ( TXN ) forecast marks a recovery inflection on industrial chip demand, analysts at Bank of America said, but flagged that automotive end markets are going through final stages of clearing inventory.

The company had seen a slump in demand for chips used in automotive markets stemming from clients stocking up on inventory to avoid a supply crunch.

(Reporting by Zaheer Kachwala in Bengaluru; Editing by Varun H K)